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Case Study: Material Facts
FACTS: A broker listed a property for a seller and received several offers on the property in a short time frame.
The listing broker discussed the offers with the seller, and helped the seller evaluate the offers. After further negotiation, the seller accepted a buyer’s offer and the parties went under contract for the property.
The contract allowed for a due diligence period. During this period, the buyer had a home inspection performed. The inspection indicated that the home had some significant electrical and plumbing issues. The buyer agent shared these issues with the listing agent and tried to negotiate for the costs of repairs, but the parties could not come to an agreement. The buyer terminated the contract before the due diligence period ended and received their earnest money deposit back.
The listing agent re-listed the subject property making no changes to the listing. A potential buyer who was previously interested in the property wanted to submit an offer. The buyer asked the listing agent the reason why the property was relisted. The listing agent informed the buyer that the previous buyer had financing issues. The new potential buyer submitted an offer on the property.
ISSUE: Did the listing broker comply with N.C.G.S. §93A-6(a)(1)?
ANALYSIS: No. N.C.G.S. § 93A-6(a)(1) states that the Commission has the power to suspend or revoke at any time a license, or to reprimand any licensee, if following a hearing, the Commission adjudges the licensee to be guilty of making any willful or negligent misrepresentation or any willful or negligent omission of material fact.
A material fact is any fact that could affect a reasonable person’s decision to buy, sell, or lease real property. A broker has an affirmative duty to take reasonable steps to discover and disclose material facts to all parties in a transaction. Additionally, brokers are expected to take reasonable steps to discover all pertinent facts that are necessary to serve their clients’ interest. In this case study, the listing broker misrepresented the reason the previous buyer canceled their contract. The listing broker had actual knowledge of the plumbing and electrical issues.
The Commission also determines whether or not a broker knew of the existence of a material fact by analyzing documents and reviewing written correspondence. The Commission uses the Reasonableness Standard to evaluate a broker’s duty to discover and disclose material facts. This standard dictates that a broker has a duty to discover and disclose any particular material fact if a reasonably knowledgeable and prudent broker would have discovered the fact during the course of the transaction and while acquiring information about the property.
In this scenario, the listing broker misrepresented the reason the previous buyer terminated their contract. The listing broker did not act like a reasonably prudent broker because theyfailed to disclose the true reason for the terminated contract. Additionally, the listing broker had knowledge of the electrical and plumbing issues and had a duty to disclose those material facts to additional parties. After the prospective buyer terminated the contract, the listing agent failed to revise the property description prior to re-listing the property and misrepresented known material facts.
The listing broker had a duty to disclose the issues with the plumbing and electrical systems in the house. The listing broker’s assertion that the terminated contract resulted from financing issues is incorrect. Every broker must exercise reasonable care and diligence in discovering and disclosing all material facts to all interested parties in a timely manner in adherence to N.C.G.S. § 93A-6(a)(1).
As a result of this misrepresentation and the listing broker’s failure to adhere to N.C.G.S. § 93A-6(a)(1), the listing broker may be subject to disciplinary action by the Commission.
RESOURCES:
N.C.G.S. § 93A-6(a)(1), 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0110
Articles: 2022-2023 General Update Course
Tech Corner: Two-Factor Authentication
How often do you check your email, social media, or financial accounts each day? Did you know that your accounts are more vulnerable to cyber-attacks if you have not enabled two-factor authentication?
The Federal Trade Commission (FTC) indicates that consumers should use two-factor authentication to protect all of their accounts, personal, business, and financial.
Employing Two-factor Authentication
Relying solely on passwords to access accounts is similar to having only one lock on a door securing a home. A door secured with a lock and a deadbolt is similar to two-factor authentication, which provides enhanced protection to individuals. Basically, if an individual implements two-factor authentication on their accounts, even if a hacker has access to their username and password, they will not be able to retrieve any information without the second authentication factor.
Common Authentication Methods Several platforms have adopted two-factor authentication and have allowed users to select their preferred method of verification. Some of the most common methods are:
- One-time passcodes,
- This method entails receiving a verification passcode via text message or email. The code typically consists of six digits, is valid for a single log-in attempt, and automatically expires.
- Authenticator application, and
- An authenticator app offers the possibility of receiving push notifications on your phone or tablet whenever there’s an attempted login to your account. These notifications typically provide details about the login attempt, such as the account being accessed, the geographical location of the attempt, the device type used, and the date and time of the login attempt. You can then approve or deny the request with a simple tap. There are several variations of authenticator apps like Google Authenticator, Microsoft Authenticator, and Duo.
- Security key.
- Security keys are physical devices serving as your secondary authentication factor, available in various forms and sizes. Security keys validate their association with your account. Some security keys plug into a USB port, while others utilize near-field communication (NFC) to establish connection when held close to your device.
The FTC recommends that individuals take a couple of minutes to set-up two-factor authentication on their accounts to prevent spending countless hours on trying to recover lost data or deal with identity theft.
Do you want to know more about keeping your personal information and identity safe? Sign up for Consumer Alerts from the FTC here.
Staff Appearances
Bruce Rinne, Information Officer, spoke at the NC REALTORS® Compliance meeting on March 5.
Bruce Rinne, Information Officer, spoke at the NC REALTORS® Commercial Alliance meeting on March 13.
Leslie Schwartz, Information Officer, spoke at Keller Williams Legacy on March 12.
Brian Heath, Consumer Protection Officer, spoke at Coldwell Banker HPW on March 14.
Charlie Moody, Deputy Legal Counsel, spoke at Premier Sotheby’s International Realty on March 12.
Brian Heath, Consumer Protection Officer, spoke at Coldwell Banker HPW on March 19.
Brian Heath, Consumer Protection Officer, spoke at the Triangle Chapter of NARPM on March 21.
Disciplinary Actions
JESSE BURGER (SPRING LAKE) – The Commission accepted the permanent voluntary surrender of the temporary real estate license of Burger, effective February 14, 2024. The Commission dismissed without prejudice allegations that Burger violated provisions of the Real Estate License Law and Commission Rules. Burger neither admitted nor denied misconduct.
CHASITY ANN DEBARBER (JACKSONVILLE) – By Consent, the Commission reprimanded Debarber, effective February 1, 2024. The Commission found that Debarber, acting as the broker-in-charge of Roga LLC, advertised properties on social media for rent by others without obtaining written permission.
ZONDRA DENISE HALL (FAYETTEVILLE) – By Consent, the Commission suspended the broker license of Hall for a period of 12 months, effective February 1, 2024, but stayed the suspension after 1 month upon certain conditions. The Commission found that Hall purchased a property in the name of Hall’s LLC and made renovations and additions to the property. Hall listed and advertised the property as connected to city sewer. Following closing, the buyer learned that the property was not connected to city sewer. Hall was notified and connected the property to city sewer. Hall failed to verify that a permit was obtained for the renovations and additions to the property completed by one of Hall’s contractors, and failed to disclose the lack of that permit to the buyer. Hall also failed to provide a physical address for herself or the firm.
SARAH KIRAMA (GREENSBORO) – By Consent, the Commission suspended the broker license of Kirama for a period of 24 months, effective January 10, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Kirama acted as a listing agent for a residential property and received a home inspection report from a buyer who later terminated the contract. The inspection report noted certain items needed repair or replacement. Kirama relisted the property and noted in agent remarks on MLS that the report was available upon request but falsely stated that seller made all repairs mentioned in the report when her seller-client made some but not all repairs noted on the report. Kirama failed to advise her client to update the RPOADS form and failed to otherwise disclose material facts described on the inspection report that were not repaired by the seller. In two subsequent transactions, Kirama provided the inspection report only after the buyers went under contract.
LCW MANAGEMENT LLC (CLEMMONS) – The Commission accepted the permanent voluntary surrender of the real estate firm license of LCW Management LLC, effective February 14, 2024. The Commission dismissed without prejudice allegations that the firm violated provisions of the Real Estate License Law and Commission Rules. The firm neither admitted nor denied misconduct.
LATOYA NICOLE OWENS (NEW BERN) – By Consent, the Commission suspended the broker license of Owens for a period of 12 months, effective February 1, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Owens represented the buyer in the subject transaction. Sellers advertised a $3,500 seller-paid closing credit and a 1% lender credit with the use of a preferred lender. Owens failed to include these terms in the offer to purchase and contract that was accepted by the seller. The sellers would not thereafter offer the credits. Owens failed to enter into a buyer agency agreement prior to the time of offer.
MANUEL PONCE DE LEON (JACKSONVILLE) – By Consent, the Commission suspended the broker license of Ponce de Leon for a period of 12 months, effective February 1, 2024. The Commission found that Ponce de Leon represented buyers in the purchase of the subject property. The buyers asked Ponce de Leon if the subject property had previously flooded. Ponce de Leon failed to inquire from the listing agent and failed to discover permits for work evidencing previous flooding to the subject property caused by a hurricane. Ponce de Leon failed to provide and review the Working with Real Estate Agents disclosure at first substantial contact and failed to provide fully executed documents to the buyers in the subject transaction.
JOSEPH R PUMA (HUNTERSVILLE) – By Consent, the Commission suspended the broker license of Puma for a period of 6 months, effective February 1, 2024. The Commission then stayed the suspension in its entirety upon certain conditions. The Commission found that Puma represented the sellers of the subject property. The buyer was represented by a buyer’s agent. Puma advertised the subject property as a “private lot home.” Puma failed to verify, prior to offer, the planned use of the multiple parcels of residential land adjacent to the subject property. A preliminary plan for a 124-single family home subdivision had been proposed and noticed by the locality. Puma did not have actual knowledge of the proposed development plans for the adjacent land. Buyer closed on the subject property and shortly thereafter, the land was sold, development of the subdivision received approval and construction began.
ROGA LLC (JACKSONVILLE) – By Consent, the Commission reprimanded ROGA LLC, effective February 1, 2024. The Commission found that the firm advertised properties on social media for rent by others without obtaining permission.
ALFRED S RUSHATZ (SANFORD) – The Commission accepted the permanent voluntary surrender of the real estate license of Rushatz, effective February 1, 2024. The Commission dismissed without prejudice allegations that Rushatz violated provisions of the Real Estate License Law and Commission Rules. Rushatz neither admitted nor denied misconduct.
JOELLEN EUBANKS SHIPMAN (LAKE TOXAWAY) – Following a hearing, the Commission permanently revoked the broker license of Shipman, effective November 20, 2023. The Commission found that Shipman listed the subject property as a short-term vacation rental. When Shipman was unable to successfully procure short-term tenants, the property owner agreed to allow for a long-term tenant in the subject property. The lease agreement approved by the property owner prohibited pets without the prior written consent of the property owner. Shipman altered the lease agreement previously approved by the property owner in order to allow pets in the subject property without obtaining consent of the property owner. Respondent failed to provide an executed copy of the lease agreement to the property owner. Respondent failed to timely deposit the tenant security deposit in her trust account.
MICHAEL D SONBERT (CLEMMONS) – The Commission accepted the permanent voluntary surrender of the real estate license of Sonbert, effective February 14, 2024. The Commission dismissed without prejudice allegations that Sonbert violated provisions of the Real Estate License Law and Commission Rules. Sonbert neither admitted nor denied misconduct.
Case Study: Criminal Conviction
FACTS: A broker attended a social event on May 17, 2022. As the broker was driving home, she was stopped by the NC Highway Patrol. When the State Trooper approached the car, he informed the broker that she was stopped for swerving over the center line.
During the traffic stop, the broker completed a field sobriety test. At the conclusion of the sobriety test, she was arrested for driving while impaired. The broker bonded out of jail the next morning. Upon being released, she noticed several missed telephone calls and text messages from her BIC.
The broker immediately called her BIC and explained that she had just been released from jail due to her arrest for DWI. During the conversation, the BIC informed the broker that she must notify the Commission if she is convicted of the DWI.
The broker’s case was disposed of on March 1, 2023. The judge found her guilty of a Class 1 misdemeanor. The broker informed the Commission of her misdemeanor DWI conviction on March 25, 2023 by submitting a Criminal Conviction Disciplinary Action Reporting Form.
ISSUE: Did the broker comply with Rule 58A .0113?
ANALYSIS: Yes. Rule 58A .0113(a) states that a broker shall file with the Commission a Criminal Conviction Disciplinary Action Reporting Form within 60 days of a:
- final judgment, order, or disposition of any felony or misdemeanor conviction;
- disciplinary action or entering into a conciliation agreement or consent order with a governmental agency or occupational licensing agency;
- final judgment, order, or disposition of a military court-martial conviction; or
- notarial commission sanction pursuant to G.S. 10B-60.
The Criminal Conviction Disciplinary Action Reporting Form is available on the Commission’s website at www.ncrec.gov or upon request to the Commission and requires the broker to set forth their:
- full legal name;
- physical and mailing address;
- real estate license number;
- telephone number;
- email address;
- social security number;
- date of birth; and
- description of the criminal conviction, military court-martial conviction, notarial commission sanction, or professional license disciplinary action, including the jurisdiction and file number.
In this scenario, the broker was convicted on March 1, 2023. She notified the Commission on March 25, 2023, of her misdemeanor DWI conviction using the Criminal Conviction Disciplinary Action Reporting Form. The broker notified the Commission 24 days after her conviction. Therefore, she was in compliance with Rule 58A .0113(a)(1) which requires brokers to notify the Commission within 60 days of a final judgment, order, or disposition of any felony or misdemeanor conviction.
If the broker submitted the Criminal Conviction Disciplinary Action Reporting Form on May 1, 2023, or later, she would not have been in compliance with License Law and Commission Rule 58A .0113.
NOTE: Brokers do not have to notify the Commission if they have been arrested, charged or otherwise accused unless it results in a felony/misdemeanor conviction, disciplinary action, military court-martial, or notarial commission sanction.
RESOURCES:
N.C.G.S. § 93A-6(a) , 93A-6(a)(8), and 93A-6(a)(15)
License Law and Commission Rules: Rule 58A .0113
Reminder: Protect Yourself Against Scams
Scamming has become more prevalent due to technological advances. Hackers are taking advantage of technology innovations like Artificial Intelligence. So it is extremely important to be cautious prior to disclosing any personal/confidential information.
Even the most tech savvy individuals can become a victim of fraudulent activity. Use these guidelines to help protect your personal information as well as your client and customer information.
- Be skeptical of unsolicited emails and messages
- Be cautious when you get texts or emails from unknown sources, especially if they are asking for personal information, financial details, or to click on suspicious links. Review the email domain to see if there are any misspellings, odd words or letters, or any other unusual parts.
- Verify websites and check URLs
- Before entering any personal information or financials on a website, make sure it is secure and legitimate. Check for HTTPS in the URL and look for security certificates. Avoid sites with misspelled URLs or domains that imitate popular brands.
- Use strong and unique passwords
- When creating online accounts, avoid using the same password for multiple websites. Consider using a password manager to generate and store complex passwords securely. This is especially important for accounts holding important and private information.
- Two-Factor Authentication:
- Whenever it is possible, enable two-factor authentication on your accounts. This adds an extra layer of security to your account by requiring a second form of verification, like a code sent to your cell phone, or email. This can help prevent unauthorized access even if your password information is compromised.
- Stay Informed and Educated:
- Stay updated on common online scams and various techniques used by scammers. Educate yourself, family members, and coworkers about how to recognize scams.
You can stay up to date with various types of popular scams by visiting USA.gov. You can also find other information there on how to report various scams.
Fair Housing: A Broker’s Guide
As real estate professionals, brokers play a crucial role in upholding fair housing principles and ensuring equal opportunities for all individuals in the housing market. In recent years, the landscape of fair housing needs has evolved, necessitating a deeper understanding and proactive approach from brokers.
Brokers must have a comprehensive understanding of federal, state, and local fair housing laws. The Federal Fair Housing Act prohibits discrimination based on race, color, religion, national origin, sex, familial status, and disability. It is also important to remember that in 2021, HUD expanded the definition of “sex” to include gender identity and sexual orientation. Brokers should regularly review and stay updated on these laws to ensure compliance in their real estate practices.
Implicit biases can impact decision-making processes, leading to unintentional discrimination in real estate transactions. Brokers must ensure fair treatment for all clients. Engaging in diversity training, self-reflection, and fostering an inclusive work environment can help brokers mitigate the effects of implicit bias in their practices.
In the event of a fair housing complaint, brokers must respond promptly and are advised to take appropriate actions to address the issue. This may involve conducting internal investigations, seeking legal guidance, and cooperating with Fair Housing authorities.
Fair housing practices are essential in the real estate industry. By staying informed, addressing implicit biases, providing equal access to housing opportunities, implementing inclusive marketing strategies, and responding effectively to fair housing complaints, brokers can contribute to a more equitable housing market for all individuals in North Carolina. Let us continue to work together to uphold the principles of fair housing and create a more inclusive future for our communities.
License Exam Change is HERE and it is GOOD!
As of March 1, 2024, the North Carolina Real Estate Commission (NCREC) is pleased to announce that the North Carolina real estate broker license examination will be administered through Pearson VUE. Pearson VUE is an international leader in exam administration for various industries in many states. In fact, they have been testing all the North Carolina insurance candidates for years.
Pearson VUE offers many testing locations throughout North Carolina and other states. In addition to 10 company-owned and operated test centers and 53 partner test centers in NC, testing sites are located on most NC Community College campuses. Also, many military bases have approved testing centers for candidates who have credentials to enter the base. You are encouraged to watch Touring a Pearson VUE Test Center if you would like more information.
The NCREC license exam is still a 2-part examination testing on the same content contained in the Broker Prelicensing Course Syllabus. The National section consists of 80 scored items and the State section consists of 60 scored items. More detailed exam information is contained in the Real Estate Licensing in North Carolina application booklet, available on the NCREC.gov website.
NOTICE: Thanks to the work of many dedicated NCREC staff members in the IT department and Education & Licensing Division, license candidates should experience no disruption in the licensing process due to the change in exam providers.
Are You Getting Notified of Rule Changes?
Did you know that you can opt-in to be notified of any proposed or final rule changes? It’s a quick and easy process to subscribe to “rulemaking.”
What is Rulemaking?
Rulemaking is the process by which the Commission implements or clarifies real estate brokerage procedure or practice requirements through the adoption, amendment, or repeal of rules. During permanent rulemaking, the Commission proposes rule language and sends it to the Office of Administrative Hearings (OAH). OAH publishes the proposed rule text in the North Carolina Register which provides notices to interested parties that the Commission has started the process to amend, adopt, or repeal a rule.
Why Should You Subscribe to Rulemaking?
- Be the first to know – get advance notice of all rule changes.
- Receive notice of an opportunity to submit comments – in writing or in person.
- Be aware as a broker-in-charge of upcoming rule changes that might affect your company’s brokerage practices.
Does This Subscription Provide Notice of Changes to Forms and General Statutes? No. Most forms are published by the North Carolina Association of REALTORS® (NCAR). NCAR publishes (to their members) a summary of changes to forms as soon as the new forms are released. General Statutes are enacted by the North Carolina General Assembly.
You can view the status of proposed bills (changes to General Statutes) or the final General Statutes online. Statutes related to real estate are also published in the Commission’s License Law and Commission Rules booklet and the most pertinent changes are addressed in the Commission’s annual Update courses.
How to Subscribe to Rulemaking Notices
- Go to www.ncrec.gov
- Scroll down to License Law & Rules
- Select Subscribe to the Commission’s mailing list to receive notice of rulemaking
- Type your name and email address
Select Subscribe
